Cleaning Up the Government’s College Cost Mess

Is the president really willing to cut off loan dollars to low-performing colleges?

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The blogs are abuzz with President Obama's latest attempt at a signature legislative accomplishment — a series of proposals to, with any luck, make college more affordable.

There's quite a bit of room for improvement on that front. As the Washington Post'sWonkblog reported this morning, the annual tuition, room, board and fees for a student at a public university has more than doubled since 1965. Today, more young people than ever are saddled with debt — some $26,600 on average — and the cost of a college degree has been outpacing inflation for decades.

This is hardly a surprising outcome, because since the 1960s the federal government has been subsidizing college attendance through its federal student loan programs. With almost no restrictions, teenagers who have never even used a credit card can sign on the dotted line and gain access to tens or hundreds of thousands of dollars in low-interest loans. It matters not whether their performance in high school suggests an aptitude to succeed in college; whether they've thought through their planned course of study and considered whether it's likely to lead to gainful employment; whether the value of the degree they're seeking will be worth tethering themselves and their future paychecks to a loan collector for much of their adult lives; or whether the school they've chosen provides a good bang for their cheaply acquired bucks.

[See a collection of political cartoons on the economy.]

As a result, colleges and universities have come to see students as little more than vehicles for transferring government dollars to their own bank accounts. The cost of a college degree has risen sharply as schools work to capture as much of that freely available money as possible. They spend it on baubles designed to attract more students, which make the school a more pleasant place to work but do little to bring about improvements in learning. Much of the money is absorbed by perhaps the least transparent type of expense a school incurs, "administration," and costs rise while outcomes stay the same (or, as an influx of underprepared kids find themselves unable to keep up with the demands of college, go down over time).

Enter the president's proposal, which centers on a new, more robust system for rating colleges on things like affordability, graduation rates and the number of students who go on to find good jobs quickly. In theory, as prospective enrollees and their parents begin to take the new rankings into account, schools will have to compete to pull costs down and outcomes up. But will it work?

[Check out our editorial cartoons on President Obama.]

The answer depends on how closely loan availability is tied to the ratings, and how seriously that connection is enforced. For schools, the chance to improve their rating and gain access to more loan money is the carrot. The stick, meanwhile, is the possibility that students who insist on going to a school that performs poorly could be refused loans. To the extent that a gusher of federally subsidized money is what has been driving the cost of college up, up and away, tightening the spigot — that is, making it harder for students to take out giant loans with little forethought — could help tamp down those prices.

The better question is whether a president who has repeatedly opined that everyone should be able to go to college would really be willing to withhold aid dollars from some students. If not, the root cause of spiraling education costs will go unaddressed — and instead of throwing cold water on an overheated industry, his bold new proposal will turn out to be more hot air.

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